College Accounting (Book Only): A ...
Solutions
College Accounting (Book Only): A ...
Identify each of the following items relating to sections of a balance sheet as Current Assets (CA), Property and Equipment (PE), Current Liabilities (CL), Long-Term Liabilities (LTL), or Owner’s Equity (OE).
- a. Accounts Payable
- b. Equipment
- c. Accounts Receivable
- d. Prepaid Insurance
- e. Mortgage Payable (current)
- f. Office Supplies
- g. Mortgage Payable (due in 3 years)
- h. Unearned Rent
- i. B. Marley, Capital
- j. Notes Payable (due in 3 months)
Identify the given items of balance sheet, as per the given classifications.
Balance sheet: This financial statement reports a company’s resources (assets) and claims of creditors (liabilities) and owners (owners’ equity) over those resources. The resources of the company are assets which include money contributed by owners and creditors. Hence, the main elements of the balance sheet are assets, liabilities, and owners’ equity.
Identify the given items of balance sheet, as per the given classifications.
| Items | Classification | Justification |
| a. | CL | Accounts payable is a short-term debt obligation, hence it is a current liability. |
| b. | PE | Equipment is a long-lived asset or fixed asset, and is reported under Property and Equipment. |
| c. | CA | Accounts receivable is an asset which could be converted into cash within one year, hence, it is a current asset. |
| d. | CA | Prepaid insurance is an asset which could be used up within the completion of an operating cycle, hence, it is a current asset. |
| e. | CL | The current portion of mortgage payable is a current debt obligation, hence it is a current liability... |
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